##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 
 þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the quarterly period ended March 31, 2009.
 or
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the transition period from  to
 Commission File Number 000-19709
 
 BIOLARGO, INC.
 (Exact name of registrant as specified in its charter)
 
 Delaware
    
    65-0159115(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 2603 Main Street, Suite 1155
Irvine, California 92614  (Address, including zip code, of principal executive offices)
 (949) 643-9540  (Registrants telephone number, including area code)
 Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act: Common Stock, $0.0067 par
value.
 
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 Yes o No þ




---



##### 



BIOLARGO, INC.
FORM 10-Q
INDEX
 PART IItem 1Financial Statements
    
    
    1Item 2Managements Discussion and Analysis
    
    
    17Item 4Controls and Procedures
    
    
    23PART IIItem 1Legal Proceedings
    
    
    25Item 2Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    25Item 6Exhibits
    
    
    26Signatures
    
    
    26Exhibit 31.1Exhibit 31.2Exhibit 32
   i




---



##### Table of Contents



PART I
 
 Item 1. Financial Statements
 BIOLARGO, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2008 AND MARCH 31, 2009
 December 31,
    
    
    March 31,2008
    
    
    2009ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    90,384
    
    
    $
    216,817Other assets
    
    
    4,586
    
    
    
    13,025Total current assets
    
    
    94,970
    
    
    
    229,842FIXED ASSETSEquipment, net
    
    
    25,954
    
    
    
    23,563Total fixed assets
    
    
    25,954
    
    
    
    23,563OTHER ASSETSLicensing rights, net
    
    
    9,633,052
    
    
    
    9,377,524Assigned agreements, net
    
    
    255,285
    
    
    
    234,012TOTAL ASSETS
    
    $
    10,009,261
    
    
    $
    9,864,941LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESAccounts payable and accrued expenses
    
    $
    993,431
    
    
    $
    1,234,343Accrued option compensation expense
    
    
    657,801
    
    
    
    1,105,789Convertible notes payable, current portion
    
    
    1,000,000
    
    
    
    1,000,000Discount on convertible notes, current portion net of amortization
    
    
    (568,738
    )
    
    
    (90,383
    )Total Current Liabilities
    
    
    2,082,494
    
    
    
    3,249,749LONG-TERM LIABILITIESConvertible notes payable, net of current portion
    
    
    973,625
    
    
    
    1,373,625Discount on convertible notes, net of current portion and amortization
    
    
    (400,950
    )
    
    
    (872,914
    )Total Long-term Liabilities
    
    
    572,675
    
    
    
    500,711TOTAL LIABILITIES
    
    
    2,655,169
    
    
    
    3,750,460COMMITMENTS, CONTINGENCIES AND SUBSEQUENT EVENTSSTOCKHOLDERS EQUITYConvertible Preferred Series A, $.00067 par value, 50,000,000 shares
authorized, -0- shares issued and outstanding, at March 31, 2009 and
December 31, 2008.
    
    
    
    
    
    
    Common Stock, $.00067 par value, 200,000,000 shares authorized,
42,349,018 and 42,261,268 shares issued, at March 31, 2009 and
December 31, 2008, respectively
    
    
    28,319
    
    
    
    28,381Additional Paid-In Capital
    
    
    49,481,805
    
    
    
    49,950,548Accumulated Deficit
    
    
    (42,156,032
    )
    
    
    (43,864,448
    )Total Stockholders Equity
    
    
    7,354,092
    
    
    
    6,114,481TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    10,009,261
    
    
    $
    9,864,941
   - 1 -




---



##### Table of Contents



BIOLARGO, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2008 AND 2009
 For the three-month periodsended March 31,2008
    
    
    2009Revenue
    
    $
    
    
    
    $
    Total revenue
    
    
    
    
    
    
    Costs and expensesSelling, general and administrative
    
    
    1,912,214
    
    
    
    991,790Research and development
    
    
    49,723
    
    
    
    36,929Amortization
    
    
    276,801
    
    
    
    279,192Total costs and expenses
    
    
    2,238,738
    
    
    
    1,307,911Loss from operations
    
    
    (2,238,738
    )
    
    
    (1,307,911
    )Other income and (expense)Interest expense
    
    
    (190,525
    )
    
    
    (403,526
    )Other income
    
    
    13,000
    
    
    
    3,021Net other income and (expense)
    
    
    (177,525
    )
    
    
    (400,505
    )Net loss
    
    $
    (2,416,263
    )
    
    $
    (1,708,416
    )Loss per common share  basic and dilutedLoss per share
    
    $
    (0.06
    )
    
    $
    (0.04
    )Weighted average common share equivalents outstanding
    
    
    40,155,296
    
    
    
    42,325,788
   - 2 -




---



##### Table of Contents



BIOLARGO, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2009
 Common StockNumber
    
    
    Par
    
    
    Additional
    
    
    Retainedof
    
    
    Value
    
    
    Paid-In
    
    
    EarningsShares
    
    
    $.00067
    
    
    Capital
    
    
    (Deficit)
    
    
    TotalBALANCE DECEMBER 31, 2008
    
    
    42,261,268
    
    
    $
    28,319
    
    
    $
    49,481,805
    
    
    $
    (42,156,032
    )
    
    $
    7,354,092Issuance of warrants as part
of convertible note offering
    
    
    
    
    
    
    
    
    
    
    368,989
    
    
    
    
    
    
    
    368,989Fair value of warrant repricing
    
    
    
    
    
    
    
    
    
    
    52,967
    
    
    
    
    
    
    
    52,967Issuance of stock options to
officer in lieu of services
    
    
    
    
    
    
    
    
    
    
    8,466
    
    
    
    
    
    
    
    8,466Issuance of stock for services
    
    
    87,750
    
    
    
    62
    
    
    
    38,321
    
    
    
    
    
    
    
    38,383Net loss for the three-month
period ended March 31, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,708,416
    )
    
    
    (1,708,416
    )42,349,018
    
    
    $
    28,381
    
    
    $
    49,950,548
    
    
    $
    (43,864,448
    )
    
    $
    6,114,481
   - 3 -




---



##### Table of Contents



BIOLARGO, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2008 AND 2009
 For the three-month periodsended March 31,2008
    
    
    2009CASH FLOWS FROM OPERATING ACTIVITIESNet Loss
    
    $
    (2,416,263
    )
    
    $
    (1,708,416
    )Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:Non-cash interest expense related to the fair value of warrants
issued in conjunction with our convertible notes
    
    
    134,999
    
    
    
    353,891Non-cash expense related to options issued to officers
    
    
    340,684
    
    
    
    329,909Non-cash expense related to warrants and options issued to consultants
    
    
    1,018,417
    
    
    
    201,000Issuance of stock for services provided
    
    
    
    
    
    
    28,383Amortization and depreciation expense
    
    
    276,260
    
    
    
    279,192Decrease (Increase) in prepaid expense
    
    
    
    
    
    
    (7,096
    )Increase in accounts payable and accrued expenses
    
    
    180,961
    
    
    
    249,570Net Cash Used In Operating Activities
    
    
    (464,943
    )
    
    
    (273,567
    )CASH FLOWS FROM FINANCING ACTIVITIESProceeds from exercised warrants
    
    
    608,750
    
    
    
    Payments on note payable
    
    
    (7,468
    )
    
    
    Proceeds from convertible notes
    
    
    
    
    
    
    400,000Net Cash Provided By Financing Activities
    
    
    601,282
    
    
    
    400,000NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    136,340
    
    
    
    126,433CASH AND CASH EQUIVALENTS  BEGINNING
    
    
    457,809
    
    
    
    90,384CASH AND CASH EQUIVALENTS  ENDING
    
    $
    594,149
    
    
    $
    216,817SUPPLEMENTAL DISCLOSURES OF CASHFLOW INFORMATIONCash Paid During the Period for:Interest
    
    $
    
    
    
    $
    Income taxes
    
    $
    
    
    
    $
    Conversion of accrued expenses to shares of the Companys common stock:Board of Directors and officer obligations
    
    $
    
    
    
    $
    10,000SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING AND INVESTING ACTIVITIES:Issuance of warrants in conjunction with convertible note offerings
    
    $
    165,725
    
    
    $
    400,000Repriced warrants in conjunction with convertible note offering
    
    $
    
    
    
    $
    52,967
   - 4 -




---



##### Table of Contents



BIOLARGO, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1. Business and Organization
 Outlook
          - 5 -




---



##### Table of Contents



BIOLARGO, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Organization
  Business Overview
      - 6 -




---



##### Table of Contents



BIOLARGO, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Odor-No-MoreÔ
      Note 2. Intangible Assets/Long-lived Assets
    - 7 -




---



##### Table of Contents



BIOLARGO, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 3. Sale of Unregistered Securities
 Fall 2008 Offering
     Spring 2008 Offering
   - 8 -




---



##### Table of Contents



BIOLARGO, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Fall 2006 Offering
  Issuance of Securities in exchange for payment of payables
   Note 4. Warrants
 Fall 2008 Warrants
    - 9 -




---



##### Table of Contents



BIOLARGO, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Number ofShares
    
    
    Price RangeOutstanding as of December 31, 2008
    
    
    5,439,697
    
    
    $
    0.125  2.00Issued
    
    
    1,720,000
    
    
    $
    0.75  1.00Exercised
    
    
    
    
    
    $Expired
    
    
    (676,775
    )
    
    $
    0.50Outstanding as of March 31, 2009
    
    
    6,482,922
    
    
    $
    0.125  2.00
  2008
    
    
    2009Risk free interest rate
    
    
    2.11
    %
    
    1.83  2.49%Expected volatility
    
    
    310
    %
    
    203  615%Expected dividend yield
    
    
    
    
    
    Forfeiture rate
    
    
    
    
    
    Expected life in years
    
    
    1.50
    
    
    0.50  3.00
     - 10 -




---



##### Table of Contents



BIOLARGO, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 5. Stockholders Equity
 Preferred Stock
  Common Stock
  Note 6. Stock-Based Compensation and Other Employee Benefit Plans
 2007 Equity Incentive Plan
      - 11 -




---



##### Table of Contents



BIOLARGO, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    WeightedAverageOptions
    
    
    Shares
    
    
    
    
    
    Price perOutstanding
    
    
    Available
    
    Price per share
    
    
    shareBalances, December 31, 2008
    
    
    785,000
    
    
    5,215,000
    
    $
    0.35  $1.89
    
    
    $
    1.02Granted
    
    
    60,000
    
    
    (60,000
    )
    $
    0.28  0.38
    
    
    $
    0.30Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    Canceled
    
    
    
    
    
    
    
    
    
    
    
    
    Balances, March 31, 2009
    
    
    845,000
    
    
    5,155,000
    
    $
    0.28  $1.89
    
    
    $
    0.97
  Weighted
    
    
    
    
    
    
    Currently ExercisableAverage
    
    
    Weighted
    
    
    Number ofRemaining
    
    
    Average
    
    
    Shares at
    
    
    WeightedContractual
    
    
    Exercise
    
    
    March 31,
    
    
    AverageOptions Outstanding at March 31, 2009
    

    Exercise Price
    
    Life
    
    
    Price
    
    
    2009
    
    
    Exercise Price20,000
    

    $0.40
    
    
    10
    
    
    $
    0.40
    
    
    
    20,000
    
    
    $
    0.40605,000
    

    $0.94  1.03
    
    
    10
    
    
    $
    0.97
    
    
    
    105,000
    
    
    $
    0.9450,000
    

    $1.89
    
    
    10
    
    
    $
    1.89
    
    
    
    50,000
    
    
    $
    1.89110,000
    

    $0.35  1.65
    
    
    10
    
    
    $
    1.04
    
    
    
    110,000
    
    
    $
    1.0460,000
    

    $0.28  0.38
    
    
    10
    
    
    $
    0.30
    
    
    
    43,333
    
    
    $
    0.30
 Stock Options Issued Outside the 2007 Equity Incentive Plan
   - 12 -




---



##### Table of Contents



BIOLARGO, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Non planOption
    
    2007 PlanRisk free interest rate
    
    2.17  4.50%
    
    2.75  4.72%Expected volatility
    
    800%
    
    654  800%Expected dividend yield
    
    
    
    Forfeiture rate
    
    
    
    Expected life in years
    
    5
    
    5
      - 13 -




---



##### Table of Contents



BIOLARGO, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 8. Accounts Payable and Accrued Expenses
  December 31,
    
    
    March 31,2008
    
    
    2009Accounts payable and accrued expenses
    
    $
    302,518
    
    
    $
    391,962Accrued interest
    
    
    560,031
    
    
    
    609,666Officer and Board of Director payable
    
    
    130,882
    
    
    
    232,715Total Accounts Payable and Accrued Expenses
    
    $
    993,431
    
    
    $
    1,234,343
  Note 9. Related Party Transactions
 New Millennium
    Note 10. Commitments and Contingencies
 Litigation
   - 14 -




---



##### Table of Contents



BIOLARGO, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Stock-Based Commitments
  C.F.O Agreement Extension
   
    
    an option to purchase 50,000 shares of the Companys common
stock, granted on February 23, 2009, at an exercise price
equal to the closing price of a share of the Companys
common stock on the grant date, such option to vest in full
90 days after grant; and
    
    options to purchase 10,000 shares of the Companys common
stock, each such option to be granted on the last day of
each month commencing April 2009 and ending January 2010,
provided that the Engagement Extension Agreement with Mr.
Dargan has not been terminated prior to each such grant
date, at an exercise price equal to the closing price of a
share of the Companys common stock on each grant date,
each such option to be fully vested upon grant.
  Note 11. Subsequent Events
 New Millennium Note
   - 15 -




---



##### Table of Contents



BIOLARGO, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Reduction of Payables
   Fall 2008 Offering
    - 16 -




---



##### Table of Contents



Item 2.
    Managements Discussion and Analysis of Financial Condition and Results of
Operations
  
    
    our business plan;
    
    the commercial viability of our technology and products incorporating our technology;
    
    the effects of competitive factors on our technology and products incorporating our
technology;
    
    expenses we will incur in operating our business;
    
    our liquidity and sufficiency of existing cash; and
    
    the success of our financing plans.
      Overview
   - 17 -




---



##### Table of Contents



Odor-No-MoreÔ
       - 18 -




---



##### Table of Contents



Results of OperationsComparison of the three-month periods ended March 31, 2009 and 2008
  Revenue
  Selling, General and Administrative Expense
      Interest expense
   - 19 -




---



##### Table of Contents



Research and Development
  Net Loss
  Liquidity and Capital Resources
     - 20 -




---



##### Table of Contents



Obligation to New Millennium Capital Partners, LLC
      - 21 -




---



##### Table of Contents



2007 Equity Incentive Plan
   Critical Accounting Policies
      - 22 -




---



##### Table of Contents



Recent Accounting Pronouncements
    
 Item 4. Controls and Procedures
     - 23 -




---



##### Table of Contents



- 24 -




---



##### Table of Contents



PART II
 OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 Fall 2008 Offering
      - 25 -




---



##### Table of Contents



Item 6. Exhibits
  Exhibit No.
    
    Description31.1
    
    
    Certification of Chief Executive Officer of Quarterly Report
Pursuant to Rule 13(a)-15(e) or Rule 15(d)-15(e).31.2
    
    
    Certification of Chief Financial Officer of Quarterly Report
Pursuant to 18 U.S.C. Section 135032
    
    
    Certification of Chief Executive Officer and Chief Financial
Officer of Quarterly Report pursuant to Rule 13(a)-15(e) or
Rule 15(d)-15(e).
 
 SIGNATURES
  BIOLARGO, INC.Date: May 15, 2009
    By:
    /s/ DENNIS P. CALVERTDennis P. CalvertChief Executive Officer  - 26 -




---



##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description31.1
    
    
    Certification of Chief Executive Officer of Quarterly Report
Pursuant to Rule 13(a)-15(e) or Rule 15(d)-15(e).31.2
    
    
    Certification of Chief Financial Officer of Quarterly Report
Pursuant to 18 U.S.C. Section 135032
    
    
    Certification of Chief Executive Officer and Chief Financial
Officer of Quarterly Report pursuant to Rule 13(a)-15(e) or
Rule 15(d)-15(e).
  - 27 -